In 2015 a report by Public Health England recommended the imposition of a 20% tax on the sale of soft drinks that contain high levels of sugar - Edexcel - A-Level Economics A - Question 7 - 2017 - Paper 1

The imposition of a 20% tax on soft drinks with high sugar content can lead to several economic effects:

1. Increase in Price and Decrease in Demand: The price of sugary drinks is likely to rise as producers pass on some or all of the tax burden to consumers. According to the law of demand, if the price of a good rises, the quantity demanded typically decreases. Thus, we can expect a fall in the demand for sugary drinks.

2. Reduction of Consumer Surplus and Producer Surplus: The increase in price leads to a reduction in consumer surplus as consumers pay more for these drinks. Similarly, producers may see a decrease in surplus due to lower sales volumes and the potential increase in production costs due to compliance with tax regulations.

3. Increased Demand for Healthier Drinks: As sugary drinks become more expensive, consumers may switch their preferences towards healthier alternatives, boosting the demand for beverages with lower sugar content.

4. Impact on Healthcare Services: By potentially reducing the consumption of sugary beverages, the tax may lead to long-term health benefits, thus decreasing the burden on healthcare systems associated with obesity and related diseases.

The tax could influence employment in various ways:

1. Employment in the Soft Drinks Industry: If demand for sugary drinks declines, companies may reduce their workforce or adjust their production levels, affecting jobs.

2. Impact on Substitute Products: Conversely, as demand shifts towards healthier drinks, employment in those sectors may rise due to increased production and sales.

A relevant diagram showing the decrease in demand for sugary drinks following the tax could be helpful. In a supply and demand graph, the demand curve would shift to the left, leading to a higher equilibrium price and lower quantity sold. Also, a tax revenue diagram could illustrate the government revenue generated from the tax.

1. Price Elasticity of Demand: The effectiveness of such a tax also depends on the price elasticity of demand for sugary drinks. If demand is elastic, a small price increase will lead to a significant drop in quantity demanded.

2. Consideration of Substitutes: The availability of health drink substitutes could amplify the impact of the tax. If consumers switch to healthier options easily, the tax could be more effective in reducing consumption.

3. Long-term Implications: Over time, the effectiveness of this tax may also depend on public awareness of health issues associated with sugary drinks and the government's ability to fund health campaigns, promoting better life choices.

4. Income Distribution Effects: The tax might be regressive, disproportionately affecting lower-income households who may spend a larger share of their income on these drinks. This factor needs consideration in evaluating the societal implications of the tax.